Obstacles to Innovation in Fixed Income – Grant Wilson / Byron Cooper-Fogarty (Tabb Forum)
March 17, 2017 \ 4 Comments
Full Article: Tabb Forum
The market seems to broadly agree that innovation is the best way to resolve the problems presented by these pressures and their impact on profitability. As demonstrated by the small number of established utilities or successful fintech start-ups, however, this often is more difficult than it looks.
The elephant in the room is (in)vested interests. In getting a large number of banks to work together on an initiative larger banks often own stakes in the incumbent market infrastructure firms. While these banks own business or clients may acknowledge problems with the incumbents the bank’s ownership stakes are an effective inhibitor to change or adoption. In part this article skirts around the core question: does bank strategic investment need to evolve from a profit center to an innovation facilitator? Sticking with the former won’t help the realization of much innovation.
Whilst I agree that technology can solve many of the perceived problems in fixed income trading, we must also follow the money. The incumbents are widespread. Traders, sales people, portfolio managers and yes, even the technology leaders themselves are cogs in this machine that all have vested interests in the status quo. Solutions that help them make money will be embraced before solutions that replace them. The technology for driverless cars is here today, but before the transition to roads filled with vehicle-to-vehicle communicating cars is complete, it will face a confusing world of a mix of humans driving together… Read more »
Well FI has not taken on board a number of the innovations that has propelled FX or exchanged traded securities. Calling for innovation when invention is required. As mentioned already the statement ‘vested interests’ well that is the issue. For too long the buyside have also not seen that their market is not working efficiently & to change this investment has been required. I have heard for too long Trading desks say ‘they will never pay to trade’ or ‘Bloomberg is free!’ (well its not & costs approx $2k pm) etc. Its such attitudes that define the industry & as… Read more »
In reality what this article highlights is it is easier for people to make noise about something that they feel is wring than actually support change through actions and as has been highlighted investment. Change does not happen overnight but it does not happen at all if the apathy of the market remains. Easier to talk about something than invest the time and money in what can be a painful process of change. I see thee incumbents happily in control for a long time to come.
Blackrock’s Richard Prager: The Liquidity Is Out There – Institutional InvestorMarch 18, 2016
Everyone is Worried About the Thing Markets Need Most, But They’re Not Asking the Right Questions – Business InsiderMarch 25, 2016
US Companies Overpaying for Bonds; Banks May Be to Blame – ReutersMarch 31, 2016